Crude Oil Jumps as US Reps Pass Contested Debt Bill
By Adedapo Adesanya
Crude oil increased on Thursday as the US House of Representatives’ passage of a bill to suspend the debt ceiling helped to offset the impact of rising inventories in the country.
Brent jumped by 2.3 per cent or $1.68 to $74.28 per barrel, as the US West Texas Intermediate (WTI) expanded by 3 per cent or $2.01 to settle at $70.10 a barrel.
Both benchmarks recovered from two-straight sessions of losses after the House passed a bill late on Wednesday to suspend the US government’s debt ceiling and improve chances of averting a default.
The Republican-controlled House voted 314-117 to send the legislation to the Senate, which must enact the measure and get it to President Joe Biden’s desk before a Monday deadline when the federal government is expected to run out of money to pay its bills.
The legislation temporarily removes – the US federal government’s borrowing limit through January 1, 2025.
The timeline will allow President Biden and Congress to set aside the politically risky issue until after the November 2024 presidential election.
It would also cap some government spending over the next two years, speed up the permitting process for certain energy projects, claw back unused COVID-19 funds and expand work requirements for food aid programs to additional recipients.
With this good as done, the market’s focus has also shifted to a June 4 meeting of the Organisation of the Petroleum Exporting Countries and its allies, including Russia, collectively called OPEC+.
According to Reuters, sources noted that the alliance is unlikely to deepen supply cuts at the Sunday meeting, but some analysts maintained that it is a possibility as demand indicators from China and the US have been disappointing in recent weeks.
Pressure came as US crude oil stockpiles rose unexpectedly last week, as imports jumped and strategic reserves dropped to their lowest since September 1983.
According to data from the Energy Information Administration (EIA), an inventory build of 4.5 million barrels was reported for the week to May 26.
At 459.7 million barrels, crude oil inventories in the U.S. are around 2 per cent below the five-year average for this time of the year.
The market will also be looking at the next moves by the US Federal Reserve and what it would do concerning its interest rates.